• Ziad El-Halabi

How to Get Money (Including $10k immediately) for Your Business

Updated: 3 days ago

IN THIS POST I’M GOING TO COVER THE FOLLOWING:


  1. How the CARES Act can help your small business

  2. What the Paycheck Protection Program (PPP) & Economic Injury Disaster Loan (EIDL) are and how they differ

  3. Who is eligible

  4. How to apply


How the CARES Act Can Help Your Small Business

The CARES Act, signed on Friday, March 27th 2020, allocates $349 billion to lending programs to help small businesses, including the self-employed, independent contractors, or “gig economy” workers. With over 30 million small businesses in the US, there will be a lot of companies looking for a piece of these funds. Not only has a new program been created (Paycheck Protection Program), but existing programs, such as the Economic Injury Disaster Loan (EIDL), have had their application processes dramatically streamlined, and personal guarantees either removed or reduced. In addition, the approval process for both programs is supposed to be expedited. Paycheck Protection Program The first new program is the Paycheck Protection Program (PPP), which provides 100% federally guaranteed loans to small businesses. Some or all of the loan can be forgiven, if the expenses meet certain requirements and are approved.

HOW MUCH CAN I GET?

The CARES Act allows for loans up to $10M, but this is based on the formula of 2.5x your average monthly payroll in the year prior to the loan date. Compensating employees over $100,000 isn’t covered by the loan. Any portion that isn’t forgiven will carry forward with a maximum maturity of 10 years and 4% interest, with the option to defer payments for up to one year.

Included in the calculation to determine loan amount:

  • Salary, commission, tips, vacation pay, sick/family leave

  • Severance pay, health insurance, group health benefits, retirement pay, state/local tax assessed on employees


Excluded from the calculation:

  • Compensation of an employee in excess of $100,000

  • Qualified sick leave wages for which credit is allowed under the Families First Coronavirus Response Act


What can be forgiven?


  • Some of all of the loan can be forgiven if staffing and wage levels are maintained. There is a remedy for wage or staffing reductions that took place between February 15, 2020 and April 26th, 2020, as long as released employees are re-hired and salary reductions are reversed.

  • If the aforementioned staffing and wage restrictions are meant, payroll expenses, employee salaries, mortgage interest, rent & utilities, and interest on debt incurred before 2/15/20 can all be forgiven.


HOW DO I APPLY FOR THE PAYCHECK PROTECTION PROGRAM (PPP)?

To apply for the Paycheck Protection Program, you will need to go through an approved SBA 7(A) lender. Many national and regional banks provide SBA 7(A) loans, but aren’t yet ready to provide the PPP. I recommend reaching out to your banker for up-to-date information on this. As soon as I know more I’ll update this section. Economic Injury Disaster Loan (EIDL)

The Economic Injury Disaster Loan (EIDL) existed prior to the CARES Act, however, the application process has been dramatically streamlined through a simple online form that requires very little business information. In addition, it is offering a $10,000 immediate advance to the bank account you enter into the form. You don’t have to pay this back. Supposedly the SBA will be delivering these advances within 3 days of application. None of the loan itself can be forgiven, but it can be used for a wider range of expenses than the Paycheck Protection Program.

HOW MUCH CAN I GET?

Up to $2 million for use paying fixed debts, payroll, accounts payable, or other bills that can’t be paid because of the disaster’s impact upon the business. The interest rate for small businesses is 3.75%, and non-profits is 2.75%. While long-term repayments of up to 30 years are available, payment terms are determined on a case-by-case basis, based upon each borrow’s ability to repay. You can receive the $10,000 immediate advance, regardless of whether you are actually approved for the EIDL!

HOW DO I APPLY FOR THE ECONOMIC INJURY DISASTER LOAN (EIDL)?

In the last 24 hours the application process has been dramatically simplified, changing from a complicated assortment of PDF forms, to a very quick online application. For my sole proprietor (single member LLC) business, it took me less than 10 minutes. In addition, the final step will ask whether you’d like a $10,000 immediate advance, as well as your bank account routing information. You can find the application here: https://covid19relief.sba.gov/




Information obtained from magnifypdx.com.

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